Momentum is building across the U.S. for commercial PACE programs that drive energy efficiency, renewable energy, and in some cases, water conservation measures.
Commercial PACE is completely voluntary. Property owners can determine if they will benefit from making their buildings more efficient. Only participating properties are subject to a specific PACE assessment. PACE can make it easier for owners of commercial property to implement energy efficiency and renewable energy projects that can save them money, make their properties more valuable, and create local jobs.
Benefits of PACE for Commercial Real Estate Owners
- No up-front costs & funds available for up to 20 years
- Immediate benefit to cash flow raises Net Operating Income
- Solves split incentives issue
- Increases building value & building efficiency
- Treated like other property taxes and assessments
- No additional debt load
For more resources for commercial real estate owners, click here.
How Commercial PACE Works?
Commercial PACE program could be put in place using the following simple steps:
Step 1: State and local governments establish, in law or public policy, a specific goal or objective: promoting energy efficiency as a means to promote jobs or better air quality, for example. A municipal government may establish a type of land or real property secured benefit district.
Step 2: Property owners within the district (or the municipality if a district is not required) can voluntarily choose to participate and an experienced contractor assesses the scope of desired improvements. This may involve a thorough energy audit for efficiency measures and their projected savings and costs, or cost estimates for renewable projects weighed similarly against projected energy savings.
Step 3: The municipality provides financing for the project, typically by selling bonds secured solely by payments made from participating property owners.
Step 4: Homeowners who receive a financing benefit from the municipality will agree to accept a property tax assessment or charge for up to 20 years, though shorter periods may be chosen or required by the municipality.
These 4 simple steps improving energy security for states and local communities by reducing their reliance on inter-state imports and strain on an already overloaded and outmoded grid system.
PACE Programs by State
Commercial PACE programs were pioneered in Boulder County, Colorado and California (Sonoma County, Palm Desert, and Placer County). These programs have made a total of 71 PACE commercial financings, proving that PACE can be an attractive source of capital to non-residential property owners. A study published in 2011 by Lawrence Berkeley National Lab, the Clinton Climate Initiative, and Renewable Funding summarizes the results of these early programs.
PACE Project Case Studies
Los Angeles County, CA: LA County PACE Program Facilitates Teamster’s Meeting Hall Upgrade
Sonoma County, CA: Simon Property Group Takes Advantage of PACE Financing
Connecticut: C-PACE program case study
Washington, DC: A Multifamily Property Uses PACE
Ann Arbor, MI: Ann Arbor’s Big Boy restaurant retrofit
San Francisco, CA: PACE Funded Retrofit of Prologis HQ
What is PACE? - 1 page handout
About PACE Presentation: an introductory presentation focused on commercial PACE
Commercial PACE Service Providers
A growing number of companies are providing a range of administrative and financing services to PACE programs nationwide. PACENow is keeping track of most PACE service providers. If you would like to list your business on our site, please contact us via e-mail: email@example.com.
Commercial Real Estate Lender Resources
Mortgage lenders derive multiple benefits from PACE. To learn more, please see PACE for CRE Lenders page.
PACENow’s Lender Support Study provides a comprehensive survey of national, regional, and local real estate finance providers with interests in PACE financings. The study finds no blanket opposition to PACE and instead offers valuable insights from the 35 senior real estate finance professionals (at 25 financial institutions) that were interviewed regarding PACE and lender consent. Click here to download the Lender Support Study that summarizes the findings of the survey.
Intended primarily for PACE program administrators and borrowers, the Lender Support Handbook could also be valuable for lenders that need forms or practical information about the lender consent process. The handbook includes sample forms for the lender consent process, including two lender consent forms, an intercreditor agreement, lender FAQs, a sample list of consented PACE transactions, and valuable industry related information. Click here for the Lender Support Handbook.
Our resources page contains PACE webinars, newsletters, latest reports on energy efficiency, PACE marketing materials, videos on PACE, and other relevant information. Sing up for our free newsletter to receive industry updates.
There are other EE/RE financing models out there. Please check out our brief summary of other financing models.
Additionally, the U.S. Department of Energy released a number of template documents for commercial PACE program administration.